English, Article, Journal or magazine article edition: Do prices in the unmediated call auction reflect insider information? - An experimental analysis Tobias Brünner; Rene Levinsky

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Bookmark: http://trove.nla.gov.au/version/1062
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Do prices in the unmediated call auction reflect insider information? - An experimental analysis
Author
  • Tobias Brünner
  • Rene Levinsky
Physical Description
  • preprint
Notes
  • The unmediated call auction is a useful trading mechanism to aggregate dispersed information. Its ability to incorporate information of a single informed insider, however, is less well understood. We analyse this question by presenting a simple call auction game where both auction prices and limit prices of uninformed traders re?ect potential insider information. The predictions of the model are tested in the laboratory. While an insider improves the call auction outcomes in terms of increasing trading volume, uninformed traders fail to incorporate the (potential) insider information in their limit prices. We also derive an equilibrium relationship between auction returns and transaction costs similar to the relations that can be found in market microstructure models of continuous markets and which are commonly applied to estimate transaction costs. The experiment provides a good environment to assess the usefulness of this method to estimate transaction costs.
  • call auction, asymmetric information, experiment, market microstructure
  • RePEc:jrp:jrpwrp:2008-090
Language
  • English
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